News and AnalysIs for

Gran Tierra announced its capital expenditures (CAPEX) Budget for 2013 will be US$363M of which US$295M will be spent on drilling and seismic activities. Colombia will receive US$224M or 62% of the total. The company will spend US$67M on Brazil but may spend more if initial onshore exploration results prove positive. Its production guidance for 2013 is 20,000bd net of working interest and royalties, which would be about 33% more than 3Q12.

Pacific Rubiales published an operational report full of interesting information but the real jaw-dropper was the growth in the venerable Rubiales field since receiving National Environmental Licensing Agency (ANLA) permission on August 8th to increase water injection. The field had produced (gross before royalties and working interest) 169mbd in July and that was the third month in a row that production had dropped. Production was only slightly better in August at 170mbd. But since then Rubiales’ field production has grown at 4% per month and the company says it is currently “in excess of 200 mbd” – 30mbpd higher than in July.

The main story this week is the assassination of Milton Enrique Rivas, a union leader in Termotécnica, a Cepsa subcontractor in Puerto Gaitan, Meta. The USO has been trying to widen the conflict to include both Ecopetrol and Pacific Rubiales to no avail. Local authorities and the company blame union member for Rivas’ murder which – whether true or not – only raises tensions. This unfortunate death will have wider implications since Colombia’s black mark is a high rate of assassinations of union leaders, which obviously gets the attention of international labor groups, NGOs and even the Democratic Party in the US:

Incidents were down considerably this week – everyone must be getting ready for the holiday. We calculate a 4-week moving average to smooth out weekly variations and although that rose significantly in the run-up to the first round of peace talks, it dropped almost as rapidly to settle at about 40 incidents per week. This value has held for the last five weeks and appears to be the “new normal”. There was a secondary peak just as this round of talks started and but since then counts have dropped for four straight weeks.

On Tuesday December 11 union leader Milton Enrique Rivas was killed in Puerto Gaitán (Meta). Rivas worked for Termotécnica, embroiled in a dispute with the Petroleum Workers Union (USO), and was killed a few meters from the company’s offices.

Message to SubscribersThe ANH and MinMinas have both had their final “rendering of accounts”. Congress is winding down and barely has enough energy to deal with tax reform which the government desperately wants to get done.

The popular press likes to report on the movement of WTI and Brent as benchmarks for Colombia crude prices. In the worst cases, they only report WTI often calling it “the price of oil”. The reality is that Colombian crude spans a number of grades and qualities based on viscosity and sulfur content. The global benchmarks are relevant but quality and transportation cost against such benchmarks are what determines price. The graph shows the distribution of API (viscosity) by volume as measured by the Ministry of Mines and Energy.

Caracol Radio reports that in the sector’s “Rendering of Accounts”, Minminas Federico Renjifo referred to 2012’s oil production delays. According to Renjifo: “Although there have been days we’ve been above 980,000 barrels and production for over a million barrels is achievable, sometimes we have had problems in pipelines, we have had licensing issues, but the number of barrels produced surpass 980,000 barrels on some days”.

The OECD will be in Bogotá this week to study Colombia’s environmental policy. The investigation is part of a larger study to identify best practices but the government is taking it as a way of validating its current strategy and showing off to the world its implementation. MinAmbiente also plans to make a major gesture in environmental management of the sensitive and emblematic Amazon region by expanding the Chiribiquete Park. From a MinAmbiente press release, translated and with commentary by Hydrocarbons Colombia.

According to a MinMinas press release, natural gas service this year reached 550,000 new users and electricity subsidies for economic stata 1, 2 and 3 will total CoP$ 2.3B (US$1.3B). This was announced on Monday by MinMinas, Federico Renjifo, as part of the mining and energy sector Accountability Public Hearing.